Chapter 1:Financial Inclusion

Data Brokers Enable Targeting of Financially Vulnerable Communities

Both the Federal Trade Commission and the Senate Commerce Committee recently released significant research reports on the data broker industry, which collects enormous volumes of information on hundreds of millions of Americans. The reports detail how these largely-unregulated companies enable precision-marketing of consumer products to financially vulnerable individuals. The Senate report further warned that the data sold by some brokers is “likely to appeal to companies that sell-high cost loans and other financially risky products,” and the FTC observed that many would find it “disconcerting,” to know that products can easily be targeted at disadvantaged people. [5]

The lists enable marketers to identify vulnerable consumers with ease.

The Senate report identified marketing lists with titles like “‘Rural and Barely Making It,’ ‘Ethnic Second-City Strugglers,’ ‘Retiring on Empty: Singles,’ ‘Tough Start: Young Single Parents,’ and ‘Credit Crunched: City Families.'” [6] The Commission’s report also highlighted segments focused on minority communities and low-income individuals, including a one called the “Urban Scramble.”[7] It also observed that data brokers sell “Assimilation Codes,” indicating a person’s degree of familiarity with the English language. [8] Much of the negative publicity these marketing lists have received stems from their evocative titles—but the fundamental issue runs deeper: the lists enable marketers to identify vulnerable consumers with ease.

Of course, targeted marketing has a place in connecting all communities with the products and services most attractive to them—including for poor consumers, people of color, and people who speak different languages. But precision targeting of vulnerable groups also carries a risk of harm.

Modern data brokerage is an evolution of an old practice. Businesses have a long history of collecting data to help them target or acquire new customers. However, information technology has facilitated a rapid increase in both the volume and availability of data about individuals. Companies are now able to collect and store far more than would have been thought possible in decades past.

“Data broker” is a broad label used to describe the companies that buy, sell, or analyze consumer information. These firms offer marketing services, fraud prevention, risk assessment,data consolidation, or just resell data to other data brokers. There is no comprehensive list of companies that fall under this umbrella. [9]

Data brokers vacuum up data from wherever they can, including from public records, social media sites, online tracking, and retail loyalty card programs. Using these data, brokers build “modeled” profiles about individuals, which include inferences and predictions about them. For example, a broker might infer marital status from the prefix “Mrs.” or wealth based on an individual’s neighborhood. These profiles are often sold in the form of “segments” (or marketing lists) which are priced and sold by the thousands.

There are few laws governing the data brokerage industry.

There are few laws governing the data brokerage industry, even though many of its practices can resemble the type of consumer scoring that is regulated other contexts. The Government Accountability Office explained that “consumers generally do not have the right to control what personal information is collected, maintained, used, and shared about them—even where such information concerns personal or sensitive matters about an individual’s physical and mental health.” [10] Similarly, federal law gives consumers the right to correct errors in their credit histories, but no similar right exists with respect to the profiles held by data brokers. The data brokerage industry has been repeatedly criticized for its lack of transparency, and the FTC recently unanimously renewed its call for Congress to enact legislation and empower individuals by allowing them access to information held by data brokers. [11]

This unregulated landscape is a challenge to social justice groups who are mindful of a history of predatory marketing and lending toward vulnerable groups. Data brokers can enable discriminatory targeting based on sensitive information like financial situation, health indicators, or other signs of vulnerability.